This copy is for your personal non-commercial use only. To order presentation-ready copies of Toronto Star content for distribution to colleagues, clients or customers, or inquire about permissions/licensing, please go to: www.TorontoStarReprints.com

OTTAWA—Companies like Uber and Airbnb were the subject of a quiet in-depth study by high-ranking federal bureaucrats, the Star has learned.

A committee of five deputy ministers and a team of analysts undertook a comprehensive study of the so-called sharing economy and its implications for Canadian policy-makers and consumers.

The study, delivered to the committee in February 2015, found significant challenges for government regulation of the notoriously slippery and ever-expanding industry of ride sharing, apartment renting and other peer-to-peer transactions.

“The fact that the sharing economy will create winners and losers is obvious,” the report reads. “What remains to be determined is what the overall impact will be on Canadian society and the degree to which proactive government responses can positively shape the outcomes of sharing economy.”

The report listed three broad areas of concern: the economy, labour and social issues and “privacy, health and safety.”

Article Continued Below

Its authors noted that Canada’s social safety net — including the employment insurance and old age security systems — may need to be “redesigned” to meet the needs of sharing-economy workers. Likewise, the risk of unreported income from those workers could lead to tax compliance issues and, eventually, a hit to social services.

Governments will also need to grapple with how to apply labour laws — such as minimum wage — to complex, part-time activities, as well as figure out how to ensure sharing economy workers are protected by insurance.

“For instance, in most cases, sharing-economy companies do not provide insurance, benefits, or training to their workers,” the report reads. “This shifts the risks onto individual sharing economy workers who remain unprotected and unsure of their rights and responsibilities.”

But the deputy ministers were also cautioned against attempting to overregulate the industry — both because it could stifle the rapid innovation in the field, and because overburdensome regulations could push the sharing economy “fully outside the government’s control.”

Interviews with sharing economy proponents and public servants in Ottawa instead suggested the federal government accustom itself to the new “reality,” tailoring their approach to benefit sharers and re-examining their relationship to entrenched industry groups.

Sharing economy startups have been a headache for municipal and provincial governments, who have long grappled with the popularity of companies like Uber and Airbnb that don’t easily fit within existing government regulations.

Some Canadian cities have taken an aggressive stance towards Uber — a “ride sharing” service where people exchange money for transportation — at the promptings of the traditional taxi lobby. In Ottawa, city hall has levelled tens of thousands of dollars in fines against Uber drivers. Calgary sought and received a court injunction to prevent Uber from operating, although city hall and the company have agreed to further discussions.

In Quebec, the provincial government is looking to crack down on AirBnB, a popular service that allows people to rent out their apartments or homes to travellers, often at a fraction of the price of a hotel room.

On the one hand, what’s at stake in these cases is not just hotel tax revenue or taxi fares, but government’s ability to regulate these services and ensure health and safety rules are followed.

On the other hand, these “disruptive” companies are unlikely to go anywhere in the immediate future, given their popularity with customers.

Throughout this little drama, the federal government has remained largely offstage. But there are signs that could soon change.

Buzzfeed Canada recently reported the Canada Revenue Agency, one of the five departments conducting the study, has sued Uber to get access to the company’s books. According to court documents, CRA has been after Uber’s books since February 2015 to ensure the company is complying with the Income Tax Act.

Uber spokeswoman Susie Heath downplayed the audit, calling it a “routine tax audit,” and said the company was co-operating with federal authorities. Heath also said Uber informally submitted information to the federal working group last year.

“Every day we work with officials across Canada at both the municipal and provincial levels and we would certainly welcome working collaboratively with the federal government as they examine the implications of the sharing economy at a national level,” Heath said in an email.

While the sharing economy poses challenges to governments’ existing regulation and enforcement efforts, the report concludes that there are also significant opportunities. Global revenues from the sharing economy are expected to increase from $15 billion in 2013 to $335 billion in 2025, making the industry a substantial economic contributor.

There are also opportunities for the government to cut costs on business travel by allowing public servants to rent from Airbnb, or to travel between meetings using cheaper (and easier to track) Uber rides rather than taxi chits. The report even hints that Ottawa could get into the sharing business itself.

“For example, the government could … find user-friendly ways to share its physical assets with local residents, communities and businesses when the assets are not in use,” the report suggests.

Challenges, opportunities for government in sharing economy

Sunil Johal is the policy director at the Mowat Centre, and the co-author of the think-tank’s recent paper on the sharing economy, Policymaking for the Sharing Economy.

Q: First, how is the sharing economy different from the kind of under-the-table cash transactions of the past?

In a lot of ways, it’s similar. Essentially, the sharing economy is about people interacting with other people, bypassing businesses to transact goods or services. So, historically, that’s always been done whether it’s somebody doing a favour for a neighbour or giving someone a lift for a little bit of extra money. The key difference with the sharing economy is the technology has enabled that peer-to-peer marketplace to explode beyond your network of neighbours or friends, so that you can connect really with anybody in the city of Toronto, or anybody in the city of Ottawa or, in some cases, anybody around the world to sell a good on something like Etsy or to give somebody a ride on Uber.

Q: From a regulation and policy standpoint, what are the issues? Because I think a lot of people would say, hey look, Uber has its own standards, it’s safe. Whereas the ministry of transportation might not agree.

There are very specific risks around issues like health and safety. If government took a completely hands-off role in something like Uber or Airbnb and we just left it up to the companies to say, OK, it’s a trust-based relationship and we’re going to let adults engage in these activities between each other, there’s always a risk of regulatory slippage or lack of oversight. Essentially, the companies are in this to make profits, and you can see in the case of a company like Volkswagen, if they’re left to their own devices, then eventually they’re going to cut corners and see if there’s a way to game the system. So you need strong oversight.

In the competition space, if we allow Uber to come in and operate in a city with no regulation while we have a highly regulated taxi industry, that’s just not fundamentally fair if we have two sets of rules and one of those sets of rules is much more lenient. So that’s not fair to existing cab drivers and that’s not fair to owners of taxi plates.

Q: Is there a revenue problem for government in terms of tax collection and licensing fees, that sort of thing?

Absolutely. I think the main one for government is since a lot of these sharing-economy companies are blurring the lines between personal and commercial, there’s a need to clarify what is the appropriate tax treatment for these types of behaviour. Because many people who are Uber drivers or Airbnb hosts may not be used to remitting taxes in a particular way, or they may not be aware of what their obligations are. So for the federal government and the (Canada Revenue Agency), a key focus they have is revenue integrity, so making sure activities that should be taxed are being taxed. There are steps the CRA for example could take to provide clearer guidance for people who are engaged in the sharing economy, in terms of plain language explanations. “If you do X in the sharing economy, here’s what your obligations would be.”

Q: What about opportunities for government? Both in terms of making use of the sharing economy as customers, as well as fostering its growth in the wider economy?

In terms of a user of the service, absolutely there would be opportunities here for the government to potentially save money to allow employees to use Airbnb when they’re on business travel, because the rates are significantly lower than staying in a hotel. Similarly Uber rates might be significantly cheaper than taxi rides, and government employees take taxis all the time going between meetings. So just on a pure efficiency, cost-savings point of view there are certainly opportunities here.

On the broader issue, I think absolutely there’s a huge opportunity for the federal government. The new federal government is promoting Canada as a digitally-savvy place, to invest, to do business, the prime minister is talking about that (last) week in Davos. So the sharing economy hits on all of those points. It’s digital, it’s innovative. How can the federal government play a role in convening provinces and municipalities together and developing a pan-Canadian strategy that promotes innovation, competition, that strengthens consumer interests? I think that’s a huge opportunity for the federal government.

More from the Toronto Star & Partners

LOADING

Copyright owned or licensed by Toronto Star Newspapers Limited. All rights reserved. Republication or distribution of this content is expressly prohibited without the prior written consent of Toronto Star Newspapers Limited and/or its licensors. To order copies of Toronto Star articles, please go to: www.TorontoStarReprints.com